Welcome to the 152nd edition of the eXponential Finance Podcast! Whether you listen to us for the first time, or are a regular, we appreciate your spending time with us.
This episode is available on Apple Podcasts, YouTube, Amazon Music, and many other major platforms via our Spotify Podcaster Page.
While the main stage at WebX Tokyo buzzes with talk of billion-dollar ETFs and institutional adoption, there’s another, shadow economy at play—one that operates on the very same rails we’re trying to build.
Hacks. Scams. Sanctions. It’s a multi-billion dollar problem. Just last year, over forty-one billion dollars in on-chain value was transferred to illicit addresses.
So how do we build a transparent, trustworthy financial system on a technology that’s so often associated with the shadows? How do you police a borderless world?
To answer that, we have the perfect guide. Not just an expert, but someone who has seen this world from both sides. Our guest today is Chengyi Ong, Head of Policy for APAC at Chainalysis, the world's leading blockchain intelligence platform. Before diving into crypto, she spent over a decade as a regulator with the Monetary Authority of Singapore. She’s gone from making the rules to helping enforce them in the wild west of Web3.
- Sanctions Are the Largest Driver of Illicit Crypto Activity: While hacks and scams grab headlines, the single largest portion of the $41 billion in on-chain value transferred to illicit addresses in the previous year was related to sanctions. This includes activity from comprehensively sanctioned jurisdictions like North Korea and Iran, as well as designated entities.
- The Scam Ecosystem Has Professionalized into "Cybercrime-as-a-Service": The rise in scams is fueled by a sophisticated supply chain. Criminals can easily purchase tools like deepfake software, seasoned social media accounts, and web hosting infrastructure from online marketplaces, often paying in crypto. This lowers the barrier to entry and increases the scalability of scam operations.
- The Bottleneck in Fighting Crypto Crime Isn't Tracing, It's Global Cooperation: The transparency of the blockchain allows firms like Chainalysis to trace illicit funds in real-time. However, the speed of crypto transactions across borders far outpaces the slow, bureaucratic process of international law enforcement collaboration required to freeze or seize assets.
- Regulatory "Implementation Lag" Is a Major Hurdle: Even in jurisdictions that are first to pass crypto legislation, like Japan, there is often a significant delay before the rules are fully implemented and licenses are granted. This lag is primarily due to the limited "supervisory capacity" of regulators who need time and resources to process applications and understand complex new business models.
- Real-World Needs in Emerging Markets Are Driving Organic Adoption: While developed markets focus on ETFs and institutional investment, true innovation and adoption are emerging in places like Vietnam. Gaps in traditional financial infrastructure for things like payments and remittances create fertile ground for crypto to meet genuine needs, suggesting a different path to growth than in the West.
